Both Tesla Model 2 And Robotaxi Necessary, Say Analysts
The Tesla Global Electric Fleet as it appeared in the ‘Master Plan, Part 3.’
The Robotaxi is on the calendar but the Model 2 isn’t. That may say more about immediate strategic exigencies than anything else.
The Tesla Robotaxi announcement is set for August 8 per an April 5th tweet from CEO Elon Musk. But there has been no further word from Musk — other than denying a Reuters story — on the low-cost vehicle after he discussed it at the fourth quarter earnings conference call in January. At that time — a mere three months ago — he waxed eloquent about the upcoming car’s significance and manufacturing methodology. The car is often referred to by analysts as the Model 2 with a predicted price target of around $25,000. (More of what he had to say about the low-cost vehicle here.)
‘Debacle’ if canceled: One high-profile Tesla analyst said it would be a “debacle” if Tesla abandons the Model 2. “If robotaxis is viewed as the ‘magic model’ to replace Model 2 we would view this as a debacle negative for the Tesla story,” said Daniel Ives, an analyst at Wedbush Securities, on Thursday in a Tweet. He went on to say “it would be a risky gamble if Tesla moved away from the Model 2 and went straight to robotaxis” and that it is “crucial to deliver a Model 2 vehicle.” Indeed, Musk has been talking about this vehicle as a kind of Holy Grail since 2018.
Skeptical about Model 2 retreat: In a research note containing a sub-heading of “But let’s not put narrative before the car” Morgan Stanley said this past week that “we have spoken with many investors who have interpreted the narrative shift away from Model 2 and towards robotaxi with great skepticism.” But the Morgan Stanley note did go on to say that current market realities may be forcing Tesla’s hand. Due to “a slowdown” in EVs, Tesla deliveries “are down nearly 9% YoY. Broader EV penetration has stalled in all key regions.” The note also cited “booming” hybrid and plug-in hybrid sales and vastly improved China competition. This may be forcing a “shift in Tesla’s strategic priorities,” the investment bank said.
Low-cost platform shared with Robotaxi? The Model 2 and Robotaxi may not be mutually exclusive. Musk in October called the next-gen vehicle “more conventional” and “utilitarian” which could apply to the hardware for both cars. “While development of the platform could be quite far along, it would be shared with the robotaxi,” Sam Fiorani, an analyst at AutoForecast Solutions LLC, told me in an email. But he added: “The margins on a low-cost model priced below the Model 3 will be tight and the current downward pressure on the Model 3’s price would squeeze the life out of such a vehicle.”
The state of the Model 3 vs Model 2: A new Rear Wheel Drive Model 3 in inventory starts at about $35,000. With a $7,500 incentive distributed over the term of a 36-month lease and 10,000 miles per year and a $0 downpayment, that comes to $449 per month, not including upfront fees and taxes. A lease for a custom-order updated 2024 Model 3 (that sports design tweaks and interior improvements) with the same terms comes to $473 a month, according to the U.S. Tesla website. Note that the above numbers are based on a customized payment with $0 down payment. Hypothetically, if we’re talking about a Model 2 priced at, let’s say, between $25,000 and $28,000 with similar terms, a lease payment (or financing payments) would drop significantly.
